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Europe in the Crosshairs of G20 Leaders

First on the list of priorities at the meeting of the leaders of the world’s twenty largest economies is – no surprise here – the financial crisis in Europe that has been stewing for over two years now. President Barack Obama has scheduled one-on-one meetings with German Chancellor Angela Merkel about the European crisis, and Russian President Vladimir Putin about the conflict in Syria, in which Russia plays a large role as Syria’s primary arms supplier.

Bond yields on Spanish government debt hit a fresh high today, signaling the market’s growing reluctance to continue loaning money to the insolvent country. Yields topped 7 percent, the highest since Spain joined the Euro. “By requesting external assistance for the euro zone’s fourth-largest economy, the Rajoy government has pushed Spain, Italy and the bloc as a whole into uncharted waters,” said Nicolas Spiro, managing director of Spiro Sovereign Strategy. “Politically speaking, the ‘line of credit’ to Spain has already failed.“

Elections in Greece on Sunday failed to calm jittery markets as stocks and commodities turned negative today. After the pro-Euro and pro-bailout New Democracy party won in Greece, Michelle Gibley, director of international research at the Schwab Center for Financial Research said, “Even though we avoided the worst-case scenario in Greece, the crisis has entered a new and dangerous phase, and it doesn’t end with Greece.”